LEC will soon implement a salary cap: Spend less or pay luxury tax

To ensure stability and fair competition in the League of Legends esports scene, the LEC (League of Legends European Championship) is set to introduce a salary cap. This cap places a maximum limit of two million per year that a team can spend on player salaries. If a team exceeds this limit, they will be required to pay fifty per cent of the amount that surpasses the cap.

LEC to introduce a salary cap

The initial report came from an investigative journalist Alejendro Gomis via blix.gg, where he informed that Riot Games has been actively exploring the implementation of a salary cap within the League of Legends esports ecosystem. You can read the tweet below:

Sources: LEC 🇪🇺 is expected to apply a salary cap.

At the moment it is expected that there will be a spending limit of 2 million annually per team.

Read all details on @blix_gg ⬇️https://t.co/UP5ZzF8mxP

— Alejandro Gomis (@anonimotum) September 27, 2023

Not to mention, this is not the first occasion when such an initiative has taken place in the esports industry. The introduction of a salary cap is part of an ongoing effort to enhance the overall structure of the League of Legends esports scene and bring it in line with global best practices.

How LEC salary cap will work?

At the time of writing, LEC did not provide the details about how this salary cap will work but we can take idea from LCK. A few months back, LCK also introduced such a measure where the Sporting Financial Regulations (SFR) of Korea advised the team not to spend over a certain limit and created a regulation. It was divided into lower and upper limits of expenditure.

Take, for instance, a team that rakes in X amount throughout the season. The rules dictate that a minimum of 70% of those earnings must go towards player salaries or bolstering growth infrastructure.

Conversely, if an organization goes over the predetermined spending cap, they’re on the hook for paying a luxury tax. In the case of LEC, the cap has been decided to be 2 million USD. Notably, the tax collected will be used to foster tier 2 leagues.

However, top esports athletes who have won International, MSI for certain times have been awarded exemptions and favour in these cap rules.

As a part of the many measures to ensure the #LCK maintains sustainable growth, Sporting Financial Regulations (SFR) will be introduced starting in the 2023 offseason.

The SFR seeks to allow the sustainable growth of teams, players and the league by regulating each team’s salary… pic.twitter.com/QCS5T1Ys8B

— LCK (@LCK) July 19, 2023

So, there is a very high chance LEC will also follow the same model as LCK and LPL.

Importance of salary cap in the esports industry

In recent years, the esports industry has faced substantial challenges, with several organizations reporting substantial financial losses. This was mainly due to a decline in investor interest in the market. Despite these setbacks, we’ve also seen significant deals and signings in the industry, driven by the hope of long-term success.

Recently, a popular North American esports organisation, Sentinels said they’re almost out of money and need help from fans. Other teams like FaZe, TSM and more had to close down parts of their organization to save money.

Interestingly the concept of salary cap is popularly used in North American sports leagues such as the NBA and MLB. So, you can say that there is a slight motivation for these successful practices.

Now, the people in charge of these leagues are thinking they can make things better. They’re looking at what successful leagues are doing and want to use similar strategies. The goal is to have a more stable and long-lasting competitive scene.

Header: LEC